Question

Required information [The following information applies to the questions displayed below.] Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows: The inventory at January 1, 2019, had a retail value of $31,000 and a cost of $11,000 based on the conventional retail method. Transactions during 2019 were as follows: Cost Retail Gross purchases $ 570,000 $ 953,000 Purchase returns 6,000 4,000 Purchase discounts 5,000 Gross sales 958,000 Sales returns 5,000 Employee discounts 3,000 Freight-in 20,000 Net markups 20,000 Net markdowns 4,000 Sales to employees are recorded net of discounts. The retail value of the December 31, 2020, inventory was $48,150, the cost-to-retail percentage for 2020 under the LIFO retail method was 42%, and the appropriate price index was 107% of the January 1, 2020, price level. The retail value of the December 31, 2021, inventory was $43,450, the cost-to-retail percentage for 2021 under the LIFO retail method was 41%, and the appropriate price index was 110% of the January 1, 2020, price level. Required: 3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2020. Estimating ending inventory for 2020 and 2021.

Answer 1

Solution:

LIFO Retail Method
	Cost	Retail	Cost to Retail ratio
Beginning Inventory	11000	31000
Add: Purchases	570000	953000
Add: Freight In	20000
Less: Purchase Return	-6000	-4000
less: Purchase Discounts	-5000
Add: Net Markups		20000
Less: Net Markdowns		-4000
Goods Available for Sale (excluding beginning inventory)	579000	965000
Goods Available for Sale (including beginning inventory)	590000	996000
Cost-to-retail Percentage ($579000/965000)			60%
Less: Net Sales ($958000 - $5000)		-9,53,000.00
Less: Employee Discounts		-3000
Estimated Ending Inventory at Retail		40,000
Estimated Ending Inventory at Cost	16400
Estimated Ending Inventory at Cost (Working):
	Retail	Cost
Beginning Inventory	31000	11000
Current Period's Layer	9,000	5400
Total	40000	16400

Solution 3:

Raleigh Department Store
Dollar-Value LIFO Retail Method
Ending Inventory at Year-end Retail Prices	Ending Inventory at Base Year Retail Prices	Inventory Layers at Base Year Retail Prices	Inventory Layers Converted to Cost
Year 2020
48150	45000	40,000.00	16400
		5,000.00	2247
Total Ending Inventory at dollar-value LIFO retail Cost			18647
Year 2021
43450	39500	39500	16195
Total Ending Inventory at dollar-value LIFO retail Cost			16195